How BlueKite is shaking up remittances in Florida, eyeing expansion into Spain

Cross-border payment service BlueKite has raised a $1.5 million seed round, the Miami-based startup announced earlier this week. It will use this funding to further develop its model, which lets migrants pay bills on behalf of their relatives who remained in their home country.

The investment was led by PeopleFund, which invested $1.2 million, completed by $300,000 from the company’s co-founders, Bobby Aitkenhead, Jose Vargas and Matias de Tezanos. As you may know, Vargas and Tezanos are also PeopleFund founders, which makes this deal a bit atypical.

“One year and a half ago, Matias, Jose and I actually created the company together. We formalized it in April 2012, before PeopleFund had established its own structure,” Aitkenhead tells TNW. “I remained fully dedicated to BlueKite’s execution, while they were turning PeopleFund into a formal entity.” [See our interview with Jose Vargas.]

In the meantime, BlueKite went on to launch in its home market, Florida, where it already offers cross-border bill payment services in countries including Mexico, Guatemala, Honduras and El Salvador. Some of the bills that can be paid through BlueKite include electricity, gas, water, Internet, cable, fixed & mobile phone, and financial services.

BlueKite’s services are distributed via third-party agents – typically, the Western Union-type stores to which migrants already go when they want to send remittances to their families. Aitkenhead details the rationale behind this distribution channel:

“It is an important part of our model, because we target those who are unbanked and underbanked. This is often the case among immigrants who send money to their family abroad, so they usually visit cash stores and money business services. Now they can also pay a bill for their relatives at the same time.”

Even if BlueKite had its own online distribution channel, it would have a hard time marketing its new product, let alone receiving payments from unbanked clients. On the other hand, cash store owners play a key role in letting clients know about this new option, which is why BlueKite decided to handpick its partners, rather than teaming up with large franchises:

“They are our marketers, so we’d rather go slower and have the right agents to push our product. The fee is very attractive to them, since they get to keep around 40% of the $4.95 we charge the sender on each bill,” Aitkenhead says.

Following its new funding, one of BlueKite’s goals is to be present in 400 stores in the state of Florida by the end of the first quarter. Florida aside, it also has expansion plans in the US, where it is pre-approved in five more States, as well as in Europe.

Its first non-US stop will be Spain, where it plans to launch at the beginning of the second quarter, although it still has to determine the right price point in a market where clients are less used transaction fees, and more used to paying extra for currency exchange or getting unfavorable rates.

While its current focus is Latin America, Aitkenhead hopes the company will soon start adding billers in Southeast Asia and/or Africa. Integrating new billers is obviously BlueKite’s main difficulty, but also the core of its business:

“The first biller was obviously the hardest to convince, the second one was slightly less difficult, and so on. So we’re at the point where our current traction makes it easier; but even once they agree, integration with their accounting system is always a technical challenge.”

Once the integration is in place, its purpose is to make it more convenient for migrants to manage their finances. Remittances represent an important share of the world’s economy. According to the Inter-American Development Bank (IADB), Latin American and Caribbean migrants sent a whopping $61 billion in remittances to their home countries in 2011, up 6 percent from $57.6 billion in 2010.

In this context, it would probably make sense to add BlueKite to our recent list of startups that are working on disrupting finance in Latin America. We asked this question to Aitkenhead:

“We could see ourselves as part of a trend that is bringing democracy to finance; but more importantly, it’s about bringing finance to everyone. Ours is a small effort in that direction, that can hopefully match some initiatives to bring financial innovation to those who need it the most.”